This weekend’s essay in the Wall Street Journal provides a glimpse into a future that’s coming a lot faster than most think. The scene-setting opener:

Imagine that you want to buy a home. You might find a real-estate agent to show you around, which is a very 20th-century way of doing things. Or you might go 21st century and use the Web to research prices and available properties and to take a few virtual tours.

When it comes time to buy, however, you will probably revert to procedures that were created in your grandparents’ era. You will assemble financial documents and present them to a loan officer at a bank, who will take weeks to determine what you can borrow and at what rate and then present you with a narrow menu of costly options.Imagine instead a simple online interface that could generate a tailored credit score for you, taking into account your future earning potential based on your education and location. It would connect you to lenders ranging from banks and credit unions to pools of individuals who want to lend privately at a negotiated rate for whatever duration you agree on. You could shop around, combine different types of financing and arrange a mortgage package that best suits you, all within a few hours.We aren’t quite there yet, but we may be soon. Over the next decade, the familiar 20th-century modes of banking and investing will give way to something very different. We are on the verge of the Uberization of finance, which will bring multiple new opportunities but also a range of new risks.

The essay is a helpful tour d’horizon of the kinds of ideas the Silicon Valley disintermediators are playing with. From democratizing loans to revolutionizing venture capital to making stock ownership more accessible to more people by eliminating the fees associated with traditional brokerages, a brave new world of finance appears to be emerging.

Complicated regulatory issues will no doubt emerge, but reducing the drag of our expensive and heavily mediated financial sector, while getting more money into the hands of entrepreneurs faster and at less cost, will be vital for the development of the new economy.

At some point, we need to focus on building as well as destruction — the motion of the unemployment rate up or down should serve to show whether we should encourage destruction (to free up labor for more productive tasks) or expanding the economy (to employ more people.)

Seems a pretty clear figure of merit to me.

Anthony

Fine.

Kevin

And then there is the real world where the Feds are adding layers of additional regulations to mortgage transactions on an almost daily basis.

Andrew Allison

With high-school educated skilled tradesmen making more than debt-laden graduates (a disparity which seems likely to increase as the supply of graduates increases faster than demand), education doesn’t seem like a very good criterion. The financial institutions already have ways of figuring out creditworthiness; the problem is that their models are proprietary (enabling them to make more-or-less arbitrary decisions. Revolving credit scores are, essentially, standardized, what’s need it a standardized “mortgage credit score”, which would than have the lenders bidding for the borrowers business in the same way that credit card and insurance companies do today.